Tankless water heaters: 6 things to consider

The next time you have to replace a water heater -- and the National Association of Certified Home Inspectors says conventional heaters have a lifespan of six to 12 years - you may have an option you hadn't considered before: the tankless water heater.

They are more efficient, but also more expensive than tank-type (storage) heaters. Here are six considerations to see whether tankless is right for you.

1. Energy savings

If you are energy green rather than dollar-bill green, then you probably can stop here. You already know which water heater is for you. In most situations, a tankless water heater uses less energy than a tank-type. They are planet-friendly.

The traditional, tank-type heater, or storage heater, keeps a tank of hot water ready for use. It is always heated; thus it requires energy to keep it constantly hot. A tankless system, sometimes called "on demand," heats the water as you use it. There is no storage tank to be continuously heated, and therefore, it uses less energy.

It should be noted that gas-fired tankless heaters are much more effective than electric, and in colder climates, for instance, electric won't heat fast enough to be useful.

2. How much?

Your energy savings, compared to a tank-type heater, depend in part on how much you use. The U.S. Department of Energy estimates energy savings of 24 percent to 34 percent in homes that use little hot water, 40 gallons or less per day. In homes that use more -- say, 80 gallons a day -- they estimate savings of 8 to 14 percent. That is partly because a tankless system uses less energy when the demand is low. It will blast on high to fill the washing machine and bathtub, but it will fire much lower if you are just washing your hands.

3. Cost

Two factors affect the cost of a hot-water system: the cost of the heater and the cost of installation.

Tankless heaters cost considerably more than storage types -- two to three times, or more. A 2012 study by the Center for Energy and Environment in Minneapolis estimated the total cost of installing a tank system in an average home to range between $900 and $1,300; the tankless type ranged from $2,500 to $4,000. A specialist in tankless installations at Aurora Plumbing in the Greater Seattle area said that although the costs just for installation do vary considerably, he also said $2,500 is a round figure -- two to three times that of a tank-type water heater installation. He went on to say that's why 99 percent of their water-heater sales are tank-type.

4. Water temperature

A tankless system has more variables that can drive up the price. One is the cold-water temperature.

While a tank-type heater is measured by the tank capacity -- ranging from 20 to 120 gallons -- a tankless heater is measured by how fast it can heat the water -- for instance, it may be able to raise the temperature of the water by 50 degrees at the flow rate of four gallons per minute. If you live in a warm climate, where tap water is tepid, not as much heat is needed to raise the water temperature to your needs. For instance, if your water comes from the tap at 65 degrees, your heater needs to provide a 55-degree increase to reach the 120-degree setting on a tank-type system (though many people prefer their tanks in the 130-degree range if they have dishwashers).

If you live in a Northern climate where the water comes out of the tap at, maybe, 45 degrees, that heater needs a huge capacity to reach 120 degrees; you might have to pay for the top-end, more expensive heater. And because the colder water uses more energy to reach 120 degrees, the energy savings won't be as great as in a warmer climate.

5. Installation

Installation costs for tankless heaters can be considerably higher than for tank-type.

Even if you are replacing an existing tank-type gas water heater, installing a tankless system is more complicated than just dropping it into the existing piping and venting. A tankless heater has to provide intense heat on short notice; it sucks a lot of gas, so you likely would have to run a new gas line to provide extra capacity. A tank-style heater is usually fed with 1/2-inch pipe; a tankless heater might need 3/4-inch pipe.

And because of the extra heat, the venting needs to be "Class 3," a stainless steel pipe that is a higher grade and more expensive than the usual water-heater venting.

"When you pay $30 for a 2-foot section of Class 3 venting, it adds up pretty quickly," the Aurora Plumbing expert said.

A tankless heater is much smaller than a storage heater, so it is possible that you can relocate the heater closer to its usage points. Instead of waiting two minutes for the hot water to reach the faucet, you may have to wait only seconds. But moving the location could also cost more for piping and ventilation.

6. Cold shower?

Because it heats water as you use it, a tankless system is not going to run out of hot water, as a storage system may do if you are third in line for your morning shower behind two adolescents.

Is tankless right for you?

Are the benefits of tankless water heaters worth the cost?

Both the Minneapolis study and a 2008 Consumer Reports study indicated that even though the tankless system lasts longer than a tank-type -- 20 years or so -- the energy savings over the longer lifespan still probably would not offset the higher cost of buying and installing one. But they pointed out that there are many variables in installing a tankless system, so in individual cases, it could be cost effective.

Even if the dollars don't work for you, you may prefer the benefits of an endless supply of hot water and the reduced energy demands. If you are seriously interested in a tankless heater, local plumbing specialists typically know the heating demand for the water temperature in your area. They should be able to analyze your hot-water needs and installation concerns to calculate whether going tankless is right for you.